SW Payton Esq Bank of England Threadneedle Street
London EC2R 8AH
RECEIVER IN
REGIS
་་
18 MAR 1974
HKK5/10
Treasury Chambers Parliament Street London SW1P 3AG
Telephone 01-930 1234 ext
13 March 1974
22
In
connection with this letter we
have
Dear Payton
STERLING GUARANTEE
HONG KONG
banked again of the relegrams about the
valvariou
ilis" there
CLAR
HK fel 1317
olio 225)
شام 20 مام
مناها
(Jokio 2144) + Aco se AK Fuel 11453 (Julie 255)
see also 208.
村
15.1X
We spoke about your letters of 28 February and 11 March about the two breaches in the MSP by Hong Kong in December and January. David Walker, with whom I have discussed the problem, is completely tied up with the Chancellor of the Duchy of Lancaster at the moment and has asked me to reply. I have also discussed it with the FCo.
2. Our view is that we should not at present take a view upon whether the two breaches by Hong Kong that have already occurred should be condoned as accidental. We should leave that decision until all the returns are in.
3.
However, we think that, on the Bank of England net to Mr Blye you should warn Hong Kong that there are likely to be difficulties if it turns out that they are in breach again. Maybe a message on the following lines is what is needed.
"The Treasury has not yet formed a view on how the breaches for December and January reported in your letters of 11 February and 4 March to the Chief of Economic Intelligence Department should be treated. But these breaches go beyond the terms for dealing with accidental breaches which are set out in FCO tele gram 1209 of 26 November 1973.
The Treasury will probably not decide on whether Hong Kong can be regarded as having fulfilled the terms of the Declaration until all the returns are in, but there would obviously be grat difficulty if it turns out that the terms of the Declaration have not been met on other occasions besides these two."
#
4. Our provisional view, which we would not like you to indicate to Hong Kong, is that if the December and January breaches turn out to be the only ones, then we could regard them as accidental and pay the guarantee in full. If, however, Hong Kong is in breach in February or March, then we would have to consider the situation very carefully. One way of proceeding might be to regard Hong Kong as ineligible for the guarantee, But to make some kind of ex-gratia payment equivalent to part only of the sum to which Hong Kong would otherwise have been entitled.
+
1